The recovery in the housing market has more room to run and investors could capitalize on this trend by buying shares of Home Depot, according to analysts at Morgan Stanley, who upgraded the home improvement retailer to overweight from equal weight on Thursday.

"The data suggests the housing recovery is in the middle innings, not the 8th/9th which the market believes," equity analyst Simeon Gutman wrote in a research note.

Analysis by the investment bank shows that 44 of the top 75 core urban areas in the United States — where 60 percent of the U.S. population live — have yet to see home prices recover to the pre-financial crisis levels during 2006-2008.

"The breadth and depth of this statistic suggests there is potential for nonrecovered/recovering housing markets to reach their prior peaks and continue growing thereafter," Gutman said.